Bundanon Trust

For the year ended 30 June 2019

1. Summary of Significant Accounting Policies

(a) Basis of preparation

The financial statements are general purpose financial statements that have been prepared in accordance with the Australian Accounting Standards - Reduced Disclosure Requirements, including Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board, the Australian Charities and Not-for-profits Commission Act 2012,

the Corporations Act 2001 and the Public Governance, Performance and Accountability (Financial Report) Rule 2015 (FRR).

The directors have resolved in accordance with AASB 101 that given the "not for profit" nature of the company, the term "Operating surplus and deficit" will be adopted rather than "Profit and loss".

The financial statements for the year ended 30 June 2019 were approved and authorised for issue by the Board of Directors on 5 September2019.

(b) Basis of measurement

The financial report has also been prepared on an accrual basis and is based on historical costs, except for donated inventory for resale which is valued at net realisable value and the Bundanon collection and land and buildings which have been measured at fair value. Changes in fair values of these assets have been dealt with directly in equity. Financial instruments have been measured at fair value but where there has been objective evidence that the asset is impaired, the cumulative loss in equity is removed from equity and recognised in the income statement. The financial statements are presented in Australian dollars.

(c) Use of estimates and judgements

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

The fair value of land has been taken to be the market value as assessed by an independent valuer every three years.

The fair value of buildings has been taken to be the depreciated market value, and assessed by an independent valuer every three years.

The fair value of the Collection is based on market value of objects valued at more than $30,000 and the residual is based on market value with significant estimates in measuring the value of those Collection objects. A sampling methodology is adopted for valuation with a sample of objects selected from each collection category. Values of the sample are determined and an average applied to the residual collection category. The collection value is assessed by an independent valuer every three years.

(d) Material Accounting Policies

The following is a summary of the material accounting policies adopted by the Trust in the preparation of the financial report:

a. Taxation matters

1. Bundanon Trust (the Trust) is a non-profit organisation established for the promotion of the arts and is exempt from income tax pursuant to Section 50-5 of the Income Tax Assessment Act, 1997. The Trust is subject to the Goods and Services Tax (GST) and Fringe Benefits Tax (FBT).

2. Revenue, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown exclusive of GST. Cashflows are presented in the statement of cash flows on a gross basis, except for the GST components of investing and financing activities, which are disclosed as operating cash flows.

3. As a public art gallery approved by the Australian Taxation Office under Division 30 of the Income Tax Assessment Act, 1997, the Trust is entitled to receive gifts of the value of $2 and upwards of money or of property other than money from donors who may claim a taxation deduction under Section 82KH (1) of the Income Tax Assessment Act, 1997.

4. As an organisation listed on the Register of Cultural Organisations administered by the Ministry for the Arts within the Department of Communications and the Arts, gifts of money to Bundanon Trust's Cultural Fund are tax deductible pursuant to Division 30-100 of the Income Tax Assessment Act, 1997.

b. Inventories

Inventories are measured at the lower of cost or net realisable value. Costs are assigned on a first-in first-out basis. A provision for obsolete stock is made when it is deemed there are excessive levels of individual stock lines.

c. Biological Assets – Livestock

During the year ended 30 June 2018 the herd of commercial Angus crossbred cattle was sold and Bundanon ceased its cattle farming activities. Agricultural activities continue under an agistment arrangement and consequently there are no biological assets held by Bundanon at 30 June 2019.

d. Non- Financial Assets Property, plant and equipment

Each class of property, plant and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation. Purchases costing less than $1,000, are expensed in the year of acquisition (other than where they form part of a group of similar items which are significant in total).

Property

Freehold land, land improvements and buildings are measured on the fair value basis, being the amount for which an asset could be exchanged between knowledgeable willing parties in an arm's length transaction. It is the policy of the Trust to have an independent valuation every three years, with annual appraisals being made by the directors.

Plant and equipment

The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows, which will be received from the assets employed and subsequent disposal. The expected net cash flows have not been discounted to present values in determining the recoverable amounts.

Intangible assets

Internally developed software

Internally developed software is initially recorded at the purchase price and amortised on a straight line basis over the period of 3 years. The balances are reviewed annually and any balance representing future benefits the realisation of which is considered to be no longer probable are written off.

Depreciation

The depreciable amounts of all buildings and plant and equipment, but excluding freehold land and historic buildings, are depreciated on a diminishing value basis over their useful lives commencing from the time the asset is held ready for use.

The major depreciation periods used for each class of depreciable assets are:

Class of fixed asset

Impairment

Assets subject to annual depreciation or amortisation are reviewed for impairment whenever events or circumstances arise that indicate that the carrying amount of the asset may be impaired.

An impairment loss is recognised where the carrying amount of the asset exceeds its recoverable amount.

e. Employee Benefits

Liabilities for ‘short-term employee benefits’ (as defined by AASB 119 Employee Benefits) and termination benefits expected within twelve months of the end of the reporting period are measured at their nominal amounts.

The nominal amount is calculated with regard to the rates expected to be paid on settlement of the liability.

Short-term employee benefit obligations

The liability for employee benefits includes provision for annual leave and long service leave. Personal leave is non vesting and recognised as an expense when it is incurred. Liabilities arising in respect of wages and salaries, annual leave and any other employee benefits expected to be settled within twelve months of the reporting date are measured at their nominal amounts based on remuneration rates which are expected to be paid when the liability is settled. The expected cost of short-term employee benefits in the form of compensated absences such as annual leave is recognised in the provision for employee benefits. All other short-term employee benefit obligations are presented as payables.

Employer contributions for superannuation have been expensed in the accounts and include liabilities up to 30 June.

Long-term employee benefit obligations

Liabilities arising in respect of long service leave and annual leave which is not expected to be settled within twelve months of the reporting date are measured at the present value of the estimated future cash outflow to be made in respect of services provided by employees up to the reporting date. This calculation incorporates for estimated indexation wage increases, probability factors on reaching entitlement and discounted cash flow based on 10 year government bond rates.

Employee benefit obligations are presented as current liabilities in the Statement of Financial Position if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting date, regardless of when the actual settlement is expected to occur.

f. Other financial assets

Other financial assets represent the balance of capital funds provided by the Australian Government on the formation of the Trust. The purpose of the funds is to provide an investment income to provide for the ongoing management of Trust assets.

These assets comprise cash on short-term deposit and listed investments. These assets are recorded at cost and subsequently revalued at fair value.

The assets cannot be drawn down to fund the ongoing operations of the Trust without prior ministerial approval.

g. Bundanon Collection

The valuation of Bundanon collection artworks as at 30 June 2018 is based on an independent valuation undertaken by Simon Storey Valuers, MVAA,

The Valuation adopted by the Valuer in June 2018 reflects a range of methodologies applicable to the various items in the Collection. Items have been valued in full subject to a threshold of $30,000 with the residual subject to Random sampling and weighting to reflect their fair value. This value was reviewed by Simon Storey Valuers MVAA in June 2019 and the valuation was confirmed.

Depreciation of the Bundanon collection

Depreciation of the collection is provided on a straight-line basis over the estimated useful life of the asset.

Impairment

Assets subject to annual depreciation are reviewed for impairment whenever events or circumstances arise that indicate that the carrying amount of the asset may be impaired. An impairment loss is recognised where the carrying amount of the asset exceeds its recoverable amount.

h. Cash

For the purposes of the statement of cash flows, cash includes deposits at call that are readily convertible to cash on hand.

i. Comparative Figures

When required, comparative figures have been reclassified for consistency with current year disclosures.

j. Revenue

The revenue described in this Note are revenue relating to the core operating activities of the Trust.

Sale of Goods

Revenue from the sales of goods is recognised when:

the risks and rewards of ownership have been transferred to the buyer;

the seller retains no managerial involvement nor effective control over the goods; the revenue and transaction costs incurred can be reliably measured; and

it is probable that the economic benefits associated with the transactions will flow to the Trust.

Provision of Services

Revenue from rendering of services is recognised by reference to the stage of completion of contracts at the reporting date.

The Trust provides an education program for schools and tertiary institutions and venue hire for weddings and functions. There is a requirement for a holding deposit to be paid to confirm the bookings and these deposits are recognised as a liability (Note 14) until the revenue is recognised on delivery of the service or on forfeiture of a deposit as a result of customer cancellation.

In all other instances, monies received will only be recognised as a liability when the service is yet to be delivered and the customer has a clear right of recourse per the terms of the agreement.

Grant Revenue

Grant revenue is recognised when the Trust obtains control of the grant and it is probable that the economic benefits gained from the grant will flow to the Trust and the amount of the grant can be reliably measured.

If conditions are attached to the grant which must be satisfied before it is eligible to receive the contribution, the recognition of the grant will be deferred until those conditions are satisfied.

Federal Government Funding

Federal government grant revenue is recognised once the terms and conditions of the contracts associated with the grant are met.

The funding agreement relating to the Annual Operating Costs and Capital Maintenance and Preservation Costs is paid annually, the conditions are satisfied within the financial year and revenue is recognised when received (Note 3(b)).

The funding agreements relating to the Artists In Residence program provided for funding over a 12 month period commencing 1 January 2019. This grant was applied partially in the year ended 30 June 2019, the balance for the year ended 30 June 2020 was recognised as current Unearned Revenue (Note 14).

Other federal grant revenue is recognised once the terms and conditions of the contracts associated with the grant are met. Unearned grant revenue is recorded as a liability as the Trust is not entitled to account for revenue until the work is completed to the satisfaction of the grantor. The basis applied is also consistent with past years, there are enforceable contracts with the grantor, subject to specific performance criteria and the income is recognised when the performance criteria are satisfied.

Other Government Funding

State and local government grant revenue is recognised once the terms and conditions of the contracts associated with the grant are met. Unearned grant revenue is recorded as a liability as we are not entitled to account for revenue until we have completed the work to the satisfaction of the grantor.

During the year ended 30 June 2018, a capital grant of $8,592,299 was provided for the Riverside Masterplan by the NSW government, with $3,436,919.60 paid on 30 June 2018. This grant is subject to terms and conditions and the whole of this payment was recorded as a liability for the year ended 30 June 2018. The work completed to date has been assessed by an independent adviser, to determine the percentage of the contract that has been completed and this value of the project costs has been applied against the grant. The proportion of the grant recognised as income for the year ended 30 June 2019 is $1,030,170.

Sponsorship Income

Sponsorship revenue is recognised once the terms and conditions of the agreement are met. There is no Unearned Sponsorship (Note 14) recorded as a liability at 30 June 2019.

Donations

Cash donations are generally recognised on receipt of the funds. Gifts of artwork and in kind contributions are recognised at their fair value in the year of receipt. The fair value of donated artworks is confirmed by Simon Storey Valuers, MAVAA annually. Funds received include those that are received on behalf of another party and are initially recognised as a liability at Note 14. Revenue is only recognised after confirmation is received over the amount the Trust may keep.

Investment Income

Interest income is recognised on an accruals basis using the effective interest method and dividend income is recognised when the right to receive payment is established.

Gains / Losses on Sale of Assets

Gains/losses from disposals of non-current assets are recognised when control of the asset has passed to the buyer. All revenue is stated net of the amount of the good and services tax (GST).

k. Expenses Consultancy Fees

The Trust has expensed costs of $11,012 in relation to the development of a Masterplan strategy. The benefit in ensuring the project was “shovel ready” has been shown to be advantageous for potential funding purposes, as evidenced by the NSW Office of Planning, Industry and Environment grant, but does not impact the underlying value of the assets of the Trust.

l. Financial Assets

The Trust classifies its financial assets in accordance with AASB 9 in the following categories:

  'financial instruments', and

  ‘financial assets held at amortised cost'.

The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

Financial assets are recognised and derecognised upon ‘trade date’.

Financial Instruments

Available-for-sale financial assets have been reclassified as Financial Instruments at fair value through other comprehensive income (FVOCI) as they are not held for resale. They are included in non-current assets unless management intends to dispose of the asset within 12 months of the balance sheet date.

These assets are recorded at fair value. Gains and losses arising from changes in fair value are recognised directly in the reserves (equity with the exception of impairment losses).

The Trust has no instruments where a reliable fair value cannot be established.

Financial assets held at amortised cost

Trade receivables, loans and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial recognition, these are measured at amortised cost. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non current assets.

Impairment of financial assets

Financial assets are assessed for impairment at each balance date.

Financial instruments at FVOCI assets - If there is objective evidence that an impairment loss on these assets has been incurred, the amount of the difference between its cost, less principal repayments and amortisation, and its current fair value, less any impairment loss previously recognised in expenses, is transferred from equity to the statement of profit or loss and other comprehensive income statement.

Financial assets held at amortised cost - If there is objective evidence that an impairment loss has been incurred for loans and receivables held at amortised cost, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the asset’s original effective interest rate. The carrying amount is reduced by way of an allowance account. The loss is recognised in the statement of profit or loss and other comprehensive income statement.

m. Changes in Australian Accounting Standards

Adoption of new Australian Accounting Standards requirements

No accounting standard has been adopted earlier than the application date as stated in the standard.

New standards and interpretations adopted AASB 9 Financial Instruments

AASB 9 Financial Instruments replaces AASB 139 Financial Instruments: Recognition and Measurement. It makes major changes to the previous guidance on the classification and measurement of financial assets and introduces an ‘expected credit loss’ model for impairment of financial assets. The impact on the Trust is not material as the adoption of the classification of financial instruments as fair value through other comprehensive income (FVOCI) is relatively consistent with past measurement of the 'available for sale' financial assets).

Financial assets are now categorised at amortised cost.

When adopting AASB 9, the Trust has applied transitional relief and opted not to restate prior periods.

Classification and measurement of the Trust's financial assets

Listed investments - Available for sale financial assets under AASB 139 included listed investments of $1,171,696 at 1 July 2018. These were reclassified to fair value through other comprehensive income (FVOCI) under AASB 9. This reclassification did not change the value of the assets.

Loans and receivables were reclassified as financial assets held at amortised cost under AASB 9. This reclassification did not change the value of the assets.

New standards and interpretations not yet adopted

The following standards, amendments to standards and interpretations have been identified as those that may impact the company in the period of initial application.

Accounting Standards	Summary of changes	Effective date
AASB 1058 Income of Not-for-Profit Entities AASB 2016-8 Amendments to Australian Accounting Standards - Australian Implementation Guidance for Not-for-Profit Entities	AASB 1058 replaces the income recognition requirements relating to private sector not-for-profit (NFP) entities, as well as the majority of income recognition to public sector NFP entities previously reflected in AASB 1004 Contributions. Bundanon recognised the capital grant income based on the satisfaction of the specific performance obligations of the grant. This has been assessed based on independent assessment of those obligations and is consistent with AASB 1058. The standard has been assessed as having minimal impact on Bundanon Trust.	1 January 2019
AASB 15 Revenue from Contracts with Customers	AASB 15 replaces AASB 118 Revenue, AASB 111 Construction Contracts and some revenue related interpretations. It establishes a new revenue recognition model and changes the basis for deciding whether revenue is recognised over time or at a point in time. Bundanon recognises grant income based on the satisfaction of the specific performance obligation of the grant. This treatment is consistent with AASB 15. The standard has been assessed as having a minimal impact on Bundanon Trust.	1 January 2019
AASB 16 Leases	AASB 16 Leases removes the distinction between operating and finance leases with most leases now coming on balance sheet. Bundanon does not hold any operating leases and therefore this standard has been assessed as having no impact on Bundanon Trust.	1 January 2019

2. Members Guarantee and Government Support

a Members guarantee

Bundanon Trust is a public company limited by guarantee. The constitution provides that:

"Every member of the Company undertakes to contribute to the property of the Company in the event of the same being wound up while he is a member, or within one year after he ceases to be a member, for payment of debts and liabilities of the Company (contracted before he ceases to be a member) and of the costs, charges and expenses of winding up and for the adjustment of the rights of the contributories among themselves, such amount as may be required, not exceeding one hundred dollars ($100)."

b Economic Dependence

The Bundanon Trust is dependent on the Australian Government's ongoing support. The Australian Government has confirmed funding of $6.027 million, commencing 1 July 2019 for four years until 30 June 2023, to support the operations of the Bundanon Trust.

Receivables are expected to be recovered in no more than 12 months. Due to the short term nature of the current receivables, their carrying amount is assumed to be the same as their fair value.

There is no objective evidence to indicate that an impairment loss has been incurred for these assets.

Financial instruments (FVOCI) have been measured at fair value and where there has been objective evidence that the asset is impaired, the cumulative loss in equity has been removed and recognised in the statement of profit or loss and other comprehensive income.

(a) The valuation of paintings, prints, drawings & ceramics are at fair value

The valuation of paintings, prints, drawings & ceramics was made by the Simon Storey, MAVAA in June 2018. This value was reviewed by Simon Storey at 30 June 2019 and the methodology and valuation was confirmed.

The Valuation adopted by the Valuer reflects a range of methodologies applicable to the various items in the Collection. Items valued at $30,000 or more were valued in full. Specific categories were also valued in full, being Textiles, Miscellaneous, Furniture and Rugs. Random sampling of the residual was undertaken to determine the average value of the sampled assets and applying the data to the various asset categories, incorporating weighting.

(b) Revaluations of non-financial assets

All revaluations were conducted in accordance with Note 1. On 30 June 2018, independent valuers conducted the revaluations. Revaluation increments include $0 for heritage and cultural (2018: increment $6,001,965).

All increments and decrements were credited to the asset revaluation surplus by asset class and included in the other comprehensive section of the Statement of Profit or Loss and Other Comprehensive Income. No decrements were expensed (2018: Nil).

(a) On 30 June 2018 the directors adopted the independent valuation at fair value of freehold land, buildings and land improvements conducted by James Morton, AAPI, of Walsh & Monaghan (Nowra) Pty Ltd.

A key objective of Bundanon Trust is the preservation of the heritage assets. Details in relation to Bundanon Trust's heritage policies are posted on the Trust's website at https://bundanon.com.au/about/.

(b) All buildings are currently listed as heritage assets and are considered of cultural significance.

Valuation methodologies adopted by the Valuer reflect the specialised nature of the properties. Riversdale and Bundanon have been valued on a depreciated replacement cost basis, assuming adequate potential profitability of the business. Eearie Park has been valued using market based evidence.

(c) Revaluations of non-financial assets.

All revaluations were conducted in accordance with Note 1. On 19 June 2018, independent Valuers conducted the revaluations.

All increments and decrements were credited to the asset revaluation surplus by asset class and included in the other comprehensive section of the Statement of Profit or Loss and Other Comprehensive Income. Revaluation increments include $0 for land and buildings (2018 increment: $1,247,664). No decrements were expensed (2018: None).

(d) The Trust has commenced a capital expenditure program, initially funded by the NSW Government Grant of $8,592,299 to construct a subterranean Gallery, Lecture and Collection Store. The Riversdale Masterplan Project has a total estimated cost of

$30.6 million and grant funding for the entire project has been sought. As previously noted, capital grant funding was announced in the 2019-20 budget and the Appropriation bills are currently pending passage through Parliament. Latest analyses based on current pricing, undertaken by independent cost estimators, WT Partnership, estimate the costs of the development will be within the grant funding sought of $30.6 million.

The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets.

No items of plant or equipment are expected to be sold or disposed of within the next 12 months

No indicators of impairment were found for intangible assets.

No intangible assets are expected to be sold or disposed of within the next 12 months.

Bundanon Trust held a herd of commercial Angus crossbred cattle which were located at the Bundanon and Eearie Park properties. During the year ended 30 June 2018, the entire herd was sold and the only ongoing agricultural activities are agistment.

Current suppliers are expected to be settled within 12 months. Non-Current suppliers are expected to be settled in more than 12 months. All suppliers as at 30 June are current. The carrying values are considered to be a reasonable approximation of fair value.

The liability for long service leave takes into account attrition rates and pay increases through promotion and inflation. The liability is also discounted by the 10 year government bond yield applicable at year end.

16. Related Parties

The names of the persons who were directors of the Bundanon Trust during the period from 1 July 2018 to 30 June 2019 are as follows:

Ms Jennifer Bott (Chairman), Mr Tony Emery, Ms Anne Flanagan, Mr Mark Tucker, Prof Paul Wellings, Mr Sam Edwards and Ms Holly Byrne.

No director received remuneration from the Trust or any related corporation in relation to the management of the Trust.

The total number of Key management personnel (KMP) included in the table above is one (2017-18: five).

The PGPA Amendment (Reporting Executive Remuneration) Rules 2019, provided that KMP has the same meaning as in AASB 124 Related Party Disclosures. This identifies KMP as those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity. Consequently, the CEO and the non-executive directors have been identified as the KMP. The directors of the Trust are unpaid, non-executive directors. Other managers identified for the year ended 30 June 2018, no longer meet this classification and the number of KMP for the year ended 30 June 2019 has fallen from five to one.

18. Capital management policies and procedures

Management controls the capital of the Trust to ensure adequate cash flows are generated to fund its programs and that returns from investments are maximised. The Board and management ensure that the overall risk management strategy is in line with this objective.

The Trust's capital consists of financial liabilities, supported by financial assets.

Management effectively manages the Trust's capital by assessing the Trust's financial risk and responding to changes in these risks and in the market. These responses may include the consideration of debt levels. There have been no changes to strategy adopted by management to control capital of the trust since the previous year.

20. Events after the reporting period

As part of the Riversdale Masterplan project, the Trust is entering into agreements and contracts in relation to the construction of the project works. The announcement of $22 million of Department of Communication and the Arts capital grant funding is currently pending passage of the Appropriation Bills through Parliament. This funding, together with the confirmed NSW Department of Planning and Environment capital grant, will fund the construction costs to complete the Riversdale Masterplan project. The directors are not aware of any other significant events since the end of the reporting period.

21. Commitments and contingencies

The Trust has signed a 4 year funding agreement with the Federal Government confirming operating funding estimated at

$6,027,000 for the period 1 July 2019 to 30 June 2023. The balance of operational funding form the previous 4 year funding agreement expiring 30 June 2019 was $1,501,000.

The Trust has signed a 2 year agreement with the State Government for capital funding of $8,592,299 towards the cost of construction of a subterranean gallery, lecture and Collection store. To date, funds have been applied of $1,030,170 and the balance is expected to be applied within the next year.

The Trust has entered into contracts in relation to the Riversdale Masterplan Project. At 30 June 2019, contracts with Capital Project Control Pty Ltd (CPC) and Kerstin Thompson Architects Pty Ltd (KTA) for $466,110 and $1,090,043, respectively have been executed. Both contracts are subject to the Development Application, currently before Shoalhaven City Council. Works have commenced and payments in relation to these contracts have been processed of $110,482 to CPC and $431,420 to KTA as at 30 June 2019.